When it comes to cryptocurrencies many people are still a little in the dark. Although they are becoming more and more widely adopted, still only a miniscule fraction of people own them or have traded them. Interestingly though, Nigeria is the single country where cryptocurrencies are traded the most. If you want to understand why this has happened, but you don’t feel particularly clued up on cryptocurrency, then don’t panic and keep reading. We will explain in layman’s terms what a cryptocurrency is, how it works, and why they have been taken on with such enthusiasm in Nigeria.
What is a Cryptocurrency?
The Oxford dictionary defines a cryptocurrency as ‘a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority’. For those who already know a little about the world of trading, this will make perfect sense, but for everyone else, let’s unpick it a little. The term ‘digital currency’ refers to the fact that cryptocurrencies do not exist physically, only online, in the same way that websites do. Verifying and keeping records using a ‘decentralized system’ means that every time a cryptocurrency changes hands a digital record is kept that is there for all to see. When money changes hands at a traditional bank on the other hand, a record is kept by the central bank. In the crypto world the system is decentralized meaning that there is no need for that one central place. Cryptography is simply where a transaction is coded, the code that is used to record Bitcoin transactions is commonly referred to as the blockchain. So, now that we’ve unravelled the jargon you can understand that cryptocurrencies are purely digital currencies, where transactions are recorded for all to see using coding.
Real Life Cryptocurrency Applications
Most people have only heard about cryptocurrency in terms of people trading it and getting very rich, or losing absolutely everything. Whilst it’s true that most cryptocurrency markets are very volatile, so it appeals to high risk traders, there are real life applications for the currencies too. One application that is starting to take off is with bitcoin casinos, where it is possible to deposit bitcoins and play casino games online. This is particularly popular as some people like to keep their gambling preferences private, for work or personal reasons and the fact that bitcoin is decentralized, as we talked about earlier, allows them to do that. Casinos.co.za provides a detailed rundown of South African websites that allow bitcoin deposits, as well as giving information on why it might be preferable to deposit using a cryptocurrency, as opposed to a traditional currency like the South African Rand. As well as casinos, Bitcoin already has good real world application for purchasing goods, it is so far the only cryptocurrency to fully demonstrate this on a global scale. However, more specialized cryptocurrencies, such as Basic Attention Token or BAT, aim to corner a section of the market. BAT wants to revolutionize the world of online advertising by improving privacy for users, whilst still offering companies a viable way to advertise. These specialized currencies have a hard path to pave, but they are slowly starting to gain traction.
Why It Works For Nigeria
A survey found that approximately 32% of Nigerians have traded cryptocurrencies, with the number of trades per month amounting to just over a million. These trades account for around $4.4 million, but what makes this method of currency so popular? The simple answer is that many Nigerians have lost faith in the traditional banking system. The Central Bank devalued the Naira yet again last year by a staggering 24%, meaning that people’s real assets lost almost a quarter in value. Not only this, but the price of the Naira is predicted to fall again next year, by around 10%. These losses are already catastrophic to people, but when you consider that food inflation is at its highest point in more than a decade, they could really be a matter of life and death. As such, it didn’t take long for people to begin taking the steps to purchasing bitcoin. This currency was out of the Nigerian government’s hands, so the theory was that their money might be safer in bitcoin form, than as Naira. This is contrary to currencies in much of the rest of the world, where cryptocurrency is considered the high risk investment and traditional currency almost risk free.
However, this year it was announced that there would be a crackdown on cryptocurrency use in Nigeria. Although the global legality of this is questionable, people who trade in the currency have already been seeing bank accounts closed down and temporarily frozen with little or no warning. It is rumoured that people who have invested heavily in cryptocurrencies are even considering moving to other countries such as Ghana and Sierra Leone to avoid further sanctions.